It was off to the races for Liontown (ASX: LTR) after signing a ‘legally binding sales and purchase term sheet’ with Tesla.
The company’s stock rallied 18% as the market opened.
The initial 5-year agreement is expected to commence in 2024, where Tesla will purchase 100,000 dry metric tonnes (dmt) of lithium spodumene in the first year, increasing to 150,000 dmt in subsequent years.
Liontown is expected to commence its first spodumene production in 2024, with initial outputs of 322,000 dmt. This is expected to ramp up to circa 550,000 dmt by 2028.
Half-way down the announcement, it states that:
“The Agreement is subject to the Parties completing negotiations and executing detailed definitive agreements by 30 May 2022 otherwise the Agreement will terminate (unless mutually extended).”
This means the overall supply agreement is still subject to some degree of execution risk.
Liontown CEO Tony Ottaviano didn't seem too worried about ongoing discussions, saying "we are absolutely delighted to have signed this agreement with leading EV manufacturer, Tesla."
"We look forward to working with Tesla as long-term partners for many years to come."
Encouragingly, Liontown shares are sitting around intraday highs, meaning investors aren't rushing to sell the news.
"We are also continuing to progress discussions with additional potential customers for the remaining available production and we are looking forward to announcing additional arrangements in the weeks ahead ..." Ottaviano said.
Finance Writer & Social Media
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